Business, Finance & Economics

Netflix splits its DVD, streaming services

Netflix co-founder and CEO Reed Hastings announced on Monday that the company will split its DVD-by-mail and video streaming services into two entities. Hastings also apologized for the way the company announced its recent price hike.

"It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes," Hastings wrote in a blog post and an email to customers. "That was certainly not our intent, and I offer my sincere apology."

Hastings wrote that, over the last few years, Netflix has grown worried that it would fail to keep up with the shift toward streaming video. That concern prompted the recent price hike and separation of streaming and DVD services.

"When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong," Hastings wrote. "In hindsight, I slid into arrogance based upon past success."

In an acknowledgement that "DVD by mail may not last forever," the company has decided to rename that service, with its distinctive red envelopes, Qwikster. The company will continue to offer streaming under the Netflix name.

"A negative of the renaming and separation is that the and websites will not be integrated," Hastings wrote, describing some of the practical changes involved in the move. "So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa."

After Hastings' announcement, the Associated Press called the move "a risky bet."

The amount of streaming content the company offers is still far less than the number of DVDs in its catalog. And competition, from Hulu, Amazon, Coinstar's Redbox kiosks and other services, is growing. Netflix could even alienate customers further by asking them to now deal with two separate websites and accounts instead of just one.